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Commentary: Time Warner's ISP alliances largely cosmetic

By creating an appearance of competition among cable-based Internet service providers, Time Warner's agreements with EarthLink and Juno Online Services increase the likelihood that the Federal Trade Commission will approve the Time Warner-America Online merger.

    By Eric Paulak, Gartner Analyst

    By creating an appearance of competition among cable-based Internet service providers, Time Warner's agreements with EarthLink and Juno Online Services increase the likelihood that the Federal Trade Commission will approve the Time Warner-America Online merger.

    See news story:
    Time Warner teams with EarthLink, delays AOL merger review
    However, such alliances may be creating an appearance of competition rather than the real thing--and I see little true competition among cable Internet service providers before 2003. In the meantime, the only real competition among broadband providers will be in the area of digital subscriber line (DSL) services.

    The situation with cable ISPs is analogous to that of telephone service providers: for several years now telephone carriers have been obligated to "unbundle" services to allow competitors to offer services on the same phone lines. No such unbundling regulations exist for cable providers, hence the FTC's concern that smaller providers be allowed access to cable lines.

    However, agreements such as the one between Time Warner and EarthLink do little to guarantee such access. Those kinds of guarantees can only come through government incentives. The Federal Communications Commission has not forced the issue, and so the FTC is trying to pick up the slack by withholding its approval of the Time Warner-AOL merger.

    The FCC is notoriously sluggish about implementing new regulations. And with a new administration about to enter the White House, the makeup of the agency may change as well, further slowing serious incentives for a cybergiant such as Time Warner-AOL to open up access to its cable channels. As things stand, Time Warner, or, for that matter AT&T, has little reason to open its infrastructure to outside competitors.

    The agreement between Time Warner and EarthLink is a step in the right direction. However, the deal consists largely of an agreement to test the necessary technology to allow competitive access, which isn't the same thing as providing that access in a meaningful way.

    Real competition will be the result of stronger government incentives--if the government decides to provide any--and that won't happen sooner than one year from now.

    (For a related commentary on cable lines being opened to ISPs, see TechRepublic.com--free registration required.)

    Entire contents, Copyright © 2000 Gartner Group, Inc. All rights reserved. The information contained herein represents Gartner's initial commentary and analysis and has been obtained from sources believed to be reliable. Positions taken are subject to change as more information becomes available and further analysis is undertaken. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of the information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof.